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RNS Number:2158R Protec PLC 23 October 2003 PROTEC PLC ("Protec" or the "Company") PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2003 Protec provides security & surveillance systems and facilities management services. HIGHLIGHTS *Turnover more than doubled to #40.4 million (2002: #19.0 million) *Operating profit before goodwill of #206,000 (2002: loss of #1.2 million) *Profit before tax of #12,000 (2002: loss of #1.1 million) *Benefits of restructuring, begun in second half, already apparent *SDA Protec - turnover almost doubled to #17.6m - new Managing Director appointed to accelerate expansion into new sales sectors in UK - office in Manchester opened as part of strategy to develop PFI opportunities - significant new contract wins include: - security system at a Royal Residence in Saudi Arabia, worth US$ 2m - Canary Wharf Estate Control Room *Falcon - turnover up nearly threefold to #5.2m - new contracts wins for surveillance products include: - two UK Ministry of Defence contracts - worth #5.3m in total - orders from Australian and UK Armed Forces - worth #3m - preferred supplier status for Docklands Light Railway's major camera system *SSS - turnover more than doubled to #17.6m - new Communications Centre opened in Bristol, incorporates most advanced Alarm Receiving Centre in UK *Board strengthened with new appointments - both executive and non-executive *Prospects remain very encouraging Enquiries: Protec plc Bruce Hiscock, Chief Executive Tel: 020 7448 1000 today Paul Geraghty, Finance Director Thereafter: 01923 211590 Teather & Greenwood Ltd Jeff Keating or Robert Naylor Tel: 020 7426 9000 Biddicks Katie Tzouliadis Tel: 020 7448 1000 Kathryn van der Kroft CHAIRMAN'S STATEMENT Introduction The Group has made very good progress during its second year of trading in its reconstructed form. All three divisions, SDA, SSS and Falcon achieved strong growth in turnover and operating profitability. A key feature of the year was a review we undertook to strengthen our operational capability. This has resulted in some important restructuring in the second half of the year, particularly within the Systems Division, SDA. I am happy to report that we are already seeing significant benefits. Our investment programme we began at the beginning of the year is continuing and will lay secure foundations for future sales and earnings growth across each division. Results Group turnover for the year was #40.4 million (2002: #19.0 million) and operating profit before amortisation of goodwill was #206,000 (2002: loss of #1.2 million). Excluding non-recurring items, central costs increased by 4% to #708,000 (2002: #683,000); these figures are both stated before goodwill. Non-recurring items related to management re-organisation totalled #175,000. Operating profits before non-recurring costs were #381,000. REVIEW OF OPERATIONS SDA Protec In the Systems Division, turnover during the year increased from #8.6 million to #17.6 million following a number of significant project wins. However, as previously reported, resourcing issues and a shortage of subcontractors delayed certain projects and increased costs. This led to disappointing returns in the first half of the year. Following our review, significant operational changes were made, including the appointment of John Kirtland as Divisional Managing Director. He has worked hard with his team and the second half of the year has seen improved results. Operational highlights include the completion of the substantial part of our work to install an integrated CCTV system across Tyne and Wear's Metro system in a contract now worth almost #7 million, and Phase One of the project to upgrade the security system at Ashworth Special Hospital. Phase Two of the project, valued at approximately #1 million is expected to be completed in 2004. Overseas business has grown well and we are in the process of completing work for the Jordanian Customs Service and have secured a contract worth US $2 million for a Royal Residence in Saudi Arabia. We have made significant investment during the year to expand into new sales sectors in the UK. We have identified three areas in particular, as offering us good growth opportunities; transport, petrochemicals and Private Finance Initiative (PFI). Our relationship with Midia Investments S.A., our largest shareholder and an investment vehicle of Norman Turner, is important in our ambitions to develop our presence in PFI partnerships and we have established a new office in Manchester to develop opportunities together. Falcon Protec The Surveillance Division, under the leadership of Mike Illingworth, had an excellent year, increasing turnover nearly threefold from #1.8 million to #5.2 million. The Division secured a number of significant electro-optical contracts including two with the UK Ministry of Defence, valued at #4.4 million and #0.9 million. Falcon also won radio surveillance orders totalling in excess of #3 million from the Australian and UK Armed Forces. Over the year, Falcon's product portfolio has been further expanded, with the signing of a number of exclusive distributorship agreements and the development of specialist camera systems. These products, and our experience in on-board transport surveillance systems for London Underground Limited, offer a very exciting range of sales opportunities in the transport and military sectors for the coming year and beyond. SSS Protec Our Security and Management Services Division, managed by Terry Baker, has more than doubled turnover from #8.6 million to #17.6 million. The first year of the Homebase facilities management contract has been completed successfully and we are currently pursuing similar UK retail contracts. Our new Communications Centre in Bristol, incorporating the most advanced Alarm Receiving Centre in the UK, was opened in February. Besides monitoring alarm signals from 4,000 retail sites, and providing helpdesk, facilities management and reporting services, the new Centre enables us to offer more advanced services to our customers. These include remote video surveillance, and plant and utility monitoring. We have already commenced a number of paid-for trials of these new services with some major retailers and they are progressing well. Board of Directors We have given much attention to the make up of the Board; to the appropriate balance between executive and non-executive members and to the appointment of a senior non-executive director. In order to strengthen our executive team, we were pleased to appoint John Kirtland, Managing Director of SDA Protec, to the Board on 16 October 2003. John is key to the changes we are making in our largest Division and he brings considerable operational management experience to this role. The composition of our non-executive team is changing too. With personal regret, I announce that Sir Brian Tovey, who was my predecessor as Chairman of the Board, will be standing down as a Director at the Group's AGM in December. Brian has been a source of sound advice, guidance and enthusiastic support and I, together with the rest of the Board, wish to place on record our appreciation for all that he has done for the Company. I am pleased to welcome Louise Turner who joined the Board as a non-executive director on 16 October 2003 representing the interests of Midia Investments. Louise replaces Francesca Welbore-Ker who resigned as a non-executive in September. Francesca has been a strong supporter of the Company and I wish to thank her on behalf of the Board for her contribution over the last few years. In the coming months, we expect to strengthen the Board further with the appointment of a senior non-executive. Our aim is to ensure proper governance without losing the spirit of enterprise evident in our fast growing group. We believe we are achieving that objective. Conclusion The second year's results for the new Protec Group demonstrate the strength of our service offering and the exciting growth prospects that exist for us. As a Board, we have set ourselves ambitious targets to develop the business further and believe that our restructuring and investment programme will underpin these ambitions. Trading in the new financial year is very encouraging and I am confident that the Group will continue to make progress in building sales and delivering improved earnings. PHILIP PARKER Chairman 23 October 2003 OPERATING REVIEW SDA Protec - Systems Division The principal business of this division is the design, supply, installation and maintenance of major integrated security systems for large commercial and public sector customers both in the UK and overseas. As we reported in March, despite significant project wins, SDA's results for the first half of the year were disappointing, having been adversely affected by a number of operational factors which caused both project delays and cost increases. As part of our steps to strengthen SDA's operations, in December 2002, we appointed John Kirtland as Managing Director for the Systems Division. John's previous experience includes operating roles with Nortel, Anixter and Xerox, and since joining, he has been addressing the business process and control issues in the Division, re-organising the management structure and increasing the focus on effective execution. The improved results in the second half reflect the progress that John and his team have already made and we expect the benefit of further improvements to flow through during the new financial year. SDA achieved significant successes in the year. We completed a large proportion of the contract for the installation of an integrated CCTV system across Tyne and Wear's Metro system. When this project was won in July last year it was worth over #6 million. The system has been enhanced over the intervening period and contract is now worth almost #7 million. Furthermore, the project is the UK's first integrated CCTV system installed on a light railway and provides SDA with an excellent reference for opportunities in the transport sector. The first phase of the project to upgrade security at Ashworth Special Hospital has been completed during the year and we have since been awarded the contract for the second phase. The project sets new standards for high security installations and the security system includes the installation of a fibre optic communications backbone, which carries data from CCTV cameras, access control and patient tracking systems, perimeter intrusion detection sensors and automatic number plate recognition technology. The second phase of the project is worth almost #1 million and will be completed during the 2003/4 financial year. SDA's overseas business continues to grow. We have completed further work on our long running projects in the Middle East including installing camera systems at the new BORDER="0" crossing points for the Jordanian Customs Service. We also secured a US $2 million contract to install a security system at a Royal Residence in the Kingdom of Saudi Arabia which will be completed over the next six months. In February 2003, the Group established an office in Abu Dhabi, an area where SDA has been actively involved in a number of projects in the past. The local presence has helped uncover opportunities for both SDA and Falcon and we have identified a pipeline of projects worth more than US $10 million. A core element of the strategic direction for both the Group and SDA has been developing PFI (Private Finance Initiatives) opportunities in the areas of health, education and transport. To co-ordinate our approach to these markets, we have established an office in Manchester focusing exclusively on these opportunities and establishing relationships with companies forming PFI consortia. The PFI team is working closely with representatives of Midia Investments SA ("Midia"), an investment vehicle of Norman Turner, who is also a major shareholder in Protec plc. As explained at the time of Midia's subscription in March 2003, Mr. Turner has significant experience of working in close conjunction with local and central government, in the implementation of partnerships between public and private sectors to deliver major commercial construction projects. The combination of this expertise with SDA's track record in integrated security and technology systems enables our PFI team to address an exciting market opportunity. Falcon Protec - Surveillance Division Falcon Protec has delivered substantial growth in all areas of its business during the last year. The Division has reinforced its standing as a CCTV surveillance specialist winning a #4.4 million contract from the UK Ministry of Defence to develop and supply an electro-optical surveillance system for operational work. Falcon's radio surveillance business has generated orders for its long established RX741 radio receiver from the Royal Australian Navy and for its new direction finding equipment from the UK Ministry of Defence. These two orders are worth over #3 million. Electro-optical and radio surveillance are key areas of Falcon's business and our products have been largely targeted towards Military and Defence customers. We are now working with several large defence contractors on camera systems for use in military vehicles. The potential for camera systems on military vehicles includes gun site cameras and camera systems for use in battlefield scenarios for both manned and remote control vehicles. We estimate that the current market is worth #250 million and hope to develop our presence here over the course of the next two years. As part of the strategic development of Falcon, we are seeking to deepen our involvement in the transport sector, specifically on train surveillance CCTV. Falcon has developed, produced and supported on-board CCTV cameras and digital video recorders that are currently in use on London Underground's Northern Line. We believe Falcon is well placed to bid for further business as similar surveillance systems are commissioned. London Underground Limited's planned expenditure over the next three years is approximately #500 million. Falcon has a solid platform to build upon and the potential to grow significantly. The recent appointment in July of a new Divisional Sales Director, Geoff Mitchell, will aid this process and help ensure that Falcon successfully meets the challenges for the business in the next year. SSS Protec - Services Division SSS Protec has continued to grow its business during the year. Two key developments were the opening of our new Communications Centre in Bristol and the successful delivery of SSS's first full Facilities Management ("FM") contract for Homebase. The new Communications Centre was opened in February 2003 and replaced our existing Alarm Receiving Centre. The new Centre complies with BS5979, ISO9002 and SSQS102 and is the most up-to-date monitoring station in the UK. The Communications Centre provides alarm monitoring for over 4,000 sites throughout the UK along with reporting services and escalation procedures that can be tailored to a customer's operating processes. In addition, SSS can provide a full helpdesk service, serving both security management and full facilities management, from the Communications Centre. Other new services that have been added include remote video surveillance and plant and utility monitoring. Improvements in compression technology and the greater availability of band width has helped to make remote video surveillance an area with enormous potential growth. SSS has been running paid-for trials of remote video surveillance and developing bespoke services for three UK retailers. These trials have demonstrated substantial cost savings and efficiency improvements for customers and we aim to roll out the trial across a complete estate of properties. SSS undertook its first full facilities management contract this year when Homebase extended its existing security management contract into an FM contract. The contract has now moved into its second year and we have won further small FM contracts. We believe there is scope to develop this business further. However, the Division is targeting only those contracts where our particular expertise can add value for both SSS and the customer. We are pleased with the level of success we have had in renewing existing contracts. This, together with the business we have won in the newer areas of facilities management and remote data monitoring, has increased the annual recurring value of SSS's contracted revenue to approximately #8 million. The Division is at an exciting time in its development and the challenge is to continue its growth profile of the last three years. GROUP OUTLOOK The first months of our financial year are traditionally quiet. However, SDA has secured new work at Canary Wharf on the new Estate Control Room. SDA has also commenced the supply and installation of CCTV systems at a small number of paid-for trials for a major petroleum retailer. If successful, this could yield a contract worth in excess of Euro5 million over 3 years, with SDA supplying, installing and commissioning cameras, digital video recorders and monitors in almost 1,000 sites throughout Europe. Finally, we have also been working closely with a number of potential partners in the building services and consulting engineering sectors. This has now resulted in our formal appointment on a partnership basis with Rotary, a building services company, and consulting engineers, R.W. Gregory, to work on a number of significant projects. SSS has continued its progress in developing its sales and marketing functions. At the end of the financial year, additional sales resource was added, which is now resulting in a larger sales pipeline. The lead time for SSS to turn a prospect into a customer is still a significant investment for SSS. However, we remain optimistic of good levels of firm orders in the second half of the current year. Falcon continues its progress in both the video and radio surveillance market places and on its current projects. We have presented solutions for potential video surveillance projects in South America and the Middle East. We have also achieved preferred supplier status for a camera system on the Docklands Light Railway and are currently carrying out trials. Furthermore, in the radio surveillance sector, we have secured further orders for the RX741 receivers, both new receivers and refurbishment of old systems. With this encouraging start to the new financial year, I remain optimistic of continuing progress across all divisions. BRUCE HISCOCK Chief Executive 23 October 2003 GROUP PROFIT AND LOSS ACCOUNT for the year ended 30 June 2003 Year ended Year ended 30 June 2003 30 June 2002 #000 #000 TURNOVER 40,418 18,982 Cost of sales (35,830) (16,120) -------------- ------------- GROSS PROFIT 4,588 2,862 Administrative Expenses - continuing operations (4,382) (4,090) - amortisation of goodwill (324) (324) ============== ============= OPERATING LOSS (118) (1,552) Net interest receivable/(paid) 130 (7) Amounts written back to investments - 485 -------------- ------------- PROFIT/(LOSS) BEFORE TAXATION 12 (1,074) Taxation - - -------------- ------------- PROFIT/(LOSS) AFTER TAXATION 12 (1,074) -------------- ------------- PROFIT/(LOSS) FOR THE YEAR 12 (1,074) -------------- ------------- EARNINGS/(LOSS) PER SHARE Basic 0.0p (0.9p) Diluted 0.0p (1.0p) Adjusted 0.3p (1.0p) All the above results derive from continuing activities. There are no recognised gains and losses other than the profit for the year. GROUP BALANCE SHEET as at 30 June 2003 2003 2002 #000 #000 FIXED ASSETS Tangible assets 875 362 Intangible assets 5,732 6,056 Investments - - 6,607 6,418 ---------- ------------- CURRENT ASSETS Stocks 1,200 115 Debtors 10,318 6,257 Cash at bank and in hand 1,634 2,171 13,152 8,543 CREDITORS - amounts falling due within one (12,285) (8,257) year ---------- ------------- NET CURRENT ASSETS 867 286 ---------- ------------- TOTAL ASSETS LESS CURRENT LIABILITIES 7,474 6,704 ---------- ------------- CREDITORS - amounts falling due after one - (22) year ---------- ------------- NET ASSETS 7,474 6,682 ---------- ------------- CAPITAL AND RESERVES Called up share capital 1,383 1,227 hare premium account 7,125 6,501 Special reserve 559 559 Profit and loss account (1,593) (1,605) ---------- ------------- SHAREHOLDERS' FUNDS (ALL EQUITY) 7,474 6,682 GROUP CASH FLOW STATEMENT for the year ended 30 June 2003 Year ended Year ended 30 June 2003 30 June 2002 #000 #000 NET CASH INFLOW FROM OPERATING 152 794 ACTIVITIES Returns on investments and servicing of 130 (7) finance Taxation 107 (108) Capital expenditure and financial (689) (169) investment Acquisitions and disposals - 485 ----------- ------------ CASH (OUTFLOW)/INFLOW BEFORE FINANCING (300) 995 Financing (237) (1,474) ----------- ------------ DECREASE IN CASH IN THE YEAR (537) (479) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Decrease in cash in the year (537) (479) Decrease/(increase) in debt and lease 17 (7) financing Loan notes repaid 1,000 1,445 MOVEMENT IN NET FUNDS IN THE YEAR 480 959 Opening net funds 1,132 173 ----------- ------------ CLOSING NET FUNDS 1,612 1,132 NOTES TO THE FINANCIAL STATEMENTS 1. The figures for 2003 are unaudited and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial statements for the year ended 30 June 2002 have been reported on by the company's auditors, and delivered to the Registrar of Companies. The audit report was not qualified and neither did it contain any statements under Section 237 (2) or (3) of the Companies Act 1985. The unaudited results for the year ended 30 June 2003 have been prepared in accordance with the accounting policies stated in the 2002 annual Report and Accounts. 2. Turnover which is stated net of value added tax, arises from the Group's principal activities and is all generated in the UK. (i) Turnover analysed by geographical destination is as follows: 2003 2002 #000 #000 UK 38,440 16,903 Rest of World 1,978 2,079 40,418 18,982 (ii) Turnover and operating profit(loss) analysed by class of business is as follows: Systems & Central Surveillance Services Operations Total #000 #000 #000 #000 2003 Turnover 22,831 17,587 - 40,418 2003 Operating profit/ 738 351 (1,207) (118) (loss) 2002 Turnover 10,375 8,572 35 18,982 2002 Operating profit/ (776) 231 (1,007) (1,552) (loss) 2003 Net assets 276 706 6,492 7,474 2002 Net assets (542) 342 6,882 6,682 3. Earnings per share is calculated on the profit for the year #12,000 (2002 loss: #1,074,000) and on the weighted average number of shares in issue in the year of 128,586,917 (2002: 122,673,561). Diluted earnings per share is calculated on the profit for the year, #12,000 (2002 loss: #1074000) and on the diluted weighted average number of shares of 132,134,273 (2002: 110,906,295). In order to reflect the ongoing operations of the group, supplementary earnings per share figures are presented below. These exclude the effects of investment write offs and amortisation of goodwill. 2003 2002 Weighted Earnings Weighted Earnings Earnings Average No per Share Earnings Average No per Share #000 of Shares Pence #000 of Shares Pence Profit/ 12 128,586,917 0.0 (1,074) 122,673,561 (0.9) (Loss) after taxation Investment & - - (485) (0.4) loan write back Amortisation 324 0.3 324 0.3 of goodwill Adjusted 336 128,586,917 0.3 (1,235) 122,673,561 (1.0) Earnings per share 4. The Report and Accounts will be posted to Shareholders shortly and will be available from the Company's registered office, Park House, Ryarsh Park, Roughetts Road, Ryarsh, West Malling, Kent, ME19 5RP. 5. The Annual General Meeting will be held at the offices of Protec plc, Axis 7, Rhodes Way, Watford, WD24 4TP at 12 noon on 5 December 2003. Copies of this announcement are available for a period of 14 days from the date hereof from the Company's registered office, Park House, Ryarsh Park, Roughetts Road, Ryarsh, West Malling, Kent, ME19 5RP and from the Company's nominated advisor, Teather & Greenwood Limited, Beaufort House, 15 St Botolph Street, London, EC3A 7QR. This information is provided by RNS The company news service from the London Stock Exchange END FR FEWESESDSEES
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